Category: Economics, Finance, and Political Economy

http://noahpinionblog.blogspot.com/2015/05/department-of-huh-yourself-british.htmlCOMMISERATING ON THE MAINSTREAM’S ECONOMICS OF DECEPTION

—MARKO—

When you’re having a good time , sometimes you can chug away on a bottle of hard liquor for a surprisingly long time. Maybe even more than one bottle with even more good times. If you keep at it , however , eventually you’ll stop. You’ll either pass out , or puke , or die , or some combination thereof. There’s no external “shock” involved – this is all endogenous to your drinking “economy”.

It’s the same with debt as with booze , and with debt , we call the resulting euphoria “increased aggregate demand” and/or “soaring asset prices”. Most consumers in the UK , and in the US , have long since puked or passed out on debt , and are not about to take on much more , and even if they’re willing , they’re often cut off by their elders (lenders).

The lack of a housing recovery should be a pretty obvious clue , as you need housing debt to finance a housing recovery. The fact that large , luxury homes have been the only segment providing support to new home sales should be a clue about who is “constrained” and who is not.

The relatively early and quite vigorous recovery in auto sales should also be a clue. Why did auto sales recover so well , compared to housing and other consumer spending ? Because we engineered subprime 2.0 in the auto lending business by exempting dealers from the new consumer lending regs , to the great consternation of Liz Warren. More debt equals more demand for autos , but since incomes haven’t gone up , it also means more eventual defaults from the debt drunks.

The entire global demand regime has been built on rising leverage instead of on broadly rising incomes , and that regime has now exhausted itself. Uniquely , economists seem unable to grasp this most important , and obvious , fact.

You guys are just weird.

Marko

—CURT—

Marko:

Love the ‘drunk’ analogy.

That economists are unable to grasp this state of affairs is my position as well. Although some of it is institutional bias, the rest is methodological bias: Macro is a correlative method, as opposed to micro, which is a causal method. Keynesian econ studies how much we can ‘lie’ to encourage economic velocity, Austrian econ studies how we can improve our truthful cooperation with one another to encourage economic velocity. You don’t learn much about a correlative and descriptive model, unless you are able to express it as an operational sequence. And to some degree, while this operational description is unnecessary in the physical sciences because we do not know the first principles of the universe, is misapplied for convenient obfuscatory political reasons in to the social sciences where we *do* know the first principles of human decision making – we are each of us an exceptional instrument for testing the rationality of incentives.

They aren’t weird. They’re incorrectly incentivized, and insufficiently chastised for what technically, is using untested (uncriticized) pseudoscience for the purpose of engaging in deceit, for the purpose of achieving full employment.

Now, once we get that this is an elaborate system of ‘lying’ not seen since the invention of scriptural monotheism, it’s clear why the ‘cult’ cannot grasp reality.

That isn’t to say most economists are bad people, any more than priests were and are, bad people. It’s that they bought the nonsense, found a place in the church of the academy, and practice its rituals: correlative non-causal justification of deceit for ostensibly moral ends.

The truth is enough. Too bad that’s hard to grasp.

http://noahpinionblog.blogspot.com/2015/05/department-of-huh-yourself-british.html?